1. Interest Rates Are Falling
- RBI has cut rates by 100 bps in 2025 (from 6.5% to 5.5%).
- Lower interest rates reduce the appeal of debt instruments and make borrowing cheaper, boosting spending and corporate capex.
2. Earnings Growth Expected to Rebound
- Nifty 50 earnings are expected to grow 14% in FY26 and 15% in FY27.
- Earnings misses have declined, with a recovery expected in H2FY26.
3. Reasonable Market Valuations
- Market valuations have corrected from 2024 highs.
- Large caps are attractively valued, providing better risk-adjusted opportunities.
4. FII Flows Turning Positive
- Foreign Institutional Investors (FIIs) have resumed buying since March 2025 after months of selling.
- Market correction and improving indicators have revived FII interest.
5. Liquidity Easing Boosts Credit
- RBI injected ₹10 lakh crore liquidity and cut CRR from 4% to 3%.
- Higher liquidity supports credit growth, spurring consumption and investment.
6. Inflation Under Control
- CPI inflation has declined steadily, with FY26 projection at 3.7% (below earlier estimate of 4%).
- Low inflation sustains purchasing power and supports equity valuations.
7. Tax Relief Stimulates Consumption
- FY26 budget offers tax relief of up to ₹1.14 lakh per person.
- Leads to higher disposable income and boosts demand across sectors.
8. Government Capex Support Continues
- FY26 budget shows 10% increase in government capital expenditure.
- Public capex fills the gap as private capex picks up, aiding economic momentum.
9. Manufacturing & GST Indicators Recovering
- Manufacturing PMI consistently above 55 since early 2025.
- GST collections have hit record highs, reflecting a rebound in economic activity.
10. Crude Oil Prices Have Fallen
- Prices dropped from ~$85 to ~$65/barrel.
- Lower oil prices benefit India (a net importer), improve margins, and support fiscal health.
We have attached a detailed note on the points mentioned above.